Applied Optoelectronics (AAOI) Dips More Than Broader Markets: What You Should Know

In the latest trading session, Applied Optoelectronics (AAOI) closed at $14.72, marking a -1.47% move from the previous day. This change lagged the S&P 500's daily loss of 0.27%. Meanwhile, the Dow lost 0.41%, and the Nasdaq, a tech-heavy index, added 0.09%.

Prior to today's trading, shares of the maker of fiber optic products used by cable TV providers had lost 6.33% over the past month. This has lagged the Computer and Technology sector's gain of 7.6% and the S&P 500's gain of 6.26% in that time.

AAOI will be looking to display strength as it nears its next earnings release, which is expected to be February 21, 2019. On that day, AAOI is projected to report earnings of -$0.04 per share, which would represent a year-over-year decline of 104.49%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $60.78 million, down 23.9% from the year-ago period.

Any recent changes to analyst estimates for AAOI should also be noted by investors. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. AAOI is currently a Zacks Rank #3 (Hold).

Valuation is also important, so investors should note that AAOI has a Forward P/E ratio of 10.94 right now. This represents a discount compared to its industry's average Forward P/E of 16.22.

Also, we should mention that AAOI has a PEG ratio of 0.73. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Electronics - Semiconductors industry currently had an average PEG ratio of 1.36 as of yesterday's close.

The Electronics - Semiconductors industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 141, putting it in the bottom 45% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.